BY LAXMAN KAFLE
Kathmandu, Apr. 24: The year 2022 is an election year for Nepal, as the country is holding polls for local levels as well as provincial and federal assemblies.
The country is already in the grip of local level election slated for May 13. The political parties have spearheaded the election campaigns across the country.
The election fever will increase further after the parties nominate their candidates for all 753 local levels on April 24 and 25.
With only 20 days left for the polls, the Election Commission Nepal (ECN) has also intensified its preparations. It has set up election offices and dispatched chief election officers and returning officers to all local levels. Likewise, elections to the House of Representatives and the Provincial Assemblies will be held in November end.
Naturally, elections increase not only political activities but also economic activities as the elections have direct links with finance.
The candidates and the political parties as well as the Election Commission mobilise a huge amount of money during elections.
Economists say that the national economy will benefit from the expenditure to be made by the government, political organisations and electoral candidates.
Contribution to economic growth
Economist and former member of the National Planning Commission Dr. Chandra Mani Adhikari said that expenditure made in the elections will make the economy vibrant.
As the EC and the candidates spend more, the national economy will benefit in terms of economic growth, employment generation and local production, he said.
He also mentioned the negative effects of elections on the national economy. “Massive unseen and unhealthy expenditure by the candidates and vested interest groups promotes corruption in the long run,” he said.
Former finance secretary Rameshore Khanal expressed similar views. “Injecting extra money into the market resulting in increased demand and supply of goods and services will lead to increase in domestic production,” Khanal told The Rising Nepal.
The election expenses that get channeled into the market can expand economic activities by creating part time jobs and other income opportunities, and thus support economic growth, he said. Most spending during the election will be for the domestic goods and services which is sure to promote the local economy, he said, adding that the spending will also go up for imported goods such as petroleum products, paper and publicity materials.
At least Rs. 100 billion is expected to get channelised directly or indirectly to the market in the election.
“I think almost 70 per cent of the expenditure in the election from both the government and political parties goes for the local goods and services and only 30 per cent goes for imported goods,” Khanal said. Around Rs. 20 billion is estimated to be spent in local election whereas the Ministry of Finance has already approved Rs. 16 billion for holding the election. Candidates are expected to spend over Rs. 80 billion in the election.
“However, the country still lacks a scientific method to calculate the expenditure done by political leaders,” Khanal said.
But it is almost certain that they are going to spend more than the ceiling fixed by the Election Commission.
“Based on the expenditure for local goods and services, we can estimate that the expenditure incurred in the election will contribute at least 0.5 per cent to 1 per cent to the Gross
Domestic Products (GDP) of the country,” he said.
Income generation for locals
Temporary employment created in election period will also boost the domestic economy and increase the income of locals. Not only does the government create temporary employment, but the candidates too create jobs while mobilising workers in election campaign.
In recent years, practice of paying the party workers mobilised in elections has developed in Nepal.
Expenditures of election candidates also contribute to the local economy.
Aggressive electoral campaigns by the candidates lead to increased activities in the service sectors like businesses of hotels/restaurants, airlines and transport sector, Khanal said.
Support to liquidity
“Expenditures in elections can be taken as investment in the country’s economy,” Khanal said.
He said that the upcoming election will boost economic activities as the candidates blow their savings in the market. “Some leaders will use hidden money which was not in banking channels. The money will come in the formal sector from informal one. Money will go to the banks and cushion the present liquidity problem,” he said.
Industrialist and former president of Confederation of Nepalese Industries Hari Bhakta Sharma said that the local election is expected to support liquidity and accelerate economic activities.
He said the present liquidity snag faced by the banks is likely to be addressed during and after polls as the money spent directly or indirectly by the government and political parties will ultimately reach the banks.
Sharma, however, said that election could not be a solution to the liquidity crunch and the present deteriorating economic situation.
“Money will reach the grassroots people through expenditure of the government and political parties during the election and it will make the economy vibrant. But the money will be spent for consumption. Thus, it will ultimately create pressure on inflation and forex reserves,” he said.
The challenge of Nepal’s economy is to focus on import and remittances for decades, he said.
Extra pressure on inflation, affects capital formation
High demand, mostly for non-durable consumer goods, may help the economy. But it may also inflate prices of foods and vegetables, and this has already been seen in the market.
“The private and business people give donations to parties as per the request of political parties, and later they increase the prices of goods to make up their expenditure. Thus, it will push inflation,” Khanal said.
According to him, in the past election years, the prices of almost all local commodities such as cooking oil, noodles and biscuits had surged.
At a time when the prices of goods have increased in the local market due to hike of fuel price in the international market, the election expenditure will contribute to further inflation.
“Due to massive use of vehicles in elections, the import of vehicles and fuel will increase and the import of alcohol, food items and election publicity materials will contribute to higher import bills,” Dr. Adhikari said.
As budget used for the election has come by curtailing funds meant for infrastructure, it will affect capital formation, Khanal said.
He noted that the election process is unlikely to boost the capital expenditure citing that most of the government funded projects are halted for the time being, he added.
Unhealthy expenditure breeds corruption
Even though the expenditure incurred in the election will support the economy, the unhealthy expenditure from the candidates and political parties would promote corruption, they said.
Dr. Adhikari said that the unseen and unfair expenditure made by the political parties, business sector and candidates would be more than the expenditure incurred from the government bodies which is linked with corruption indirectly as they spend money for extra gain after reaching the key position.
This time too, it is estimated that Rs. 50 billion will be spent directly or indirectly from the state coffers for the three-tier elections.
The candidates from three levels will spend roughly Rs. 200 billion. By adding both the amounts, it comes to around 6.5 per cent of Nepal’s GDP, he said.
“There will be more impact of election on our economy as compared to other economies. Expenditures – seen and unseen – are much higher in Nepal than developed countries and neighbouring India based on per voter,” he said.
The political parties must be accountable to control expenditure, Dr. Adhikari said.
– The Rising Nepal
